Antitrust class action against Qualcomm (originally related to FTC action) thrown out on summary judgment; same judge previously denied discovery of my communications with Microsoft

In January, I reported on the partial dismissal of an antitrust class action against Qualcomm in the Northern District of California (a case that was brought in the wake of the FTC's ultimately unsuccessful enforcement action against the chipmaker), and at the time I already wrote that the ruins of that complaint "[would] hardly survive summary judgment." In February I agreed with Qualcomm's arguments for not reopening discovery, as did the court. After the SJ motion was filed in April, I "I guess[ed] Qualcomm's motion [would] succeed." And that is what has just happened.

On Tuesday, "[a]fter carefully considering the briefing and conducting oral argument on August 3, 2023," Judge Jacqueline Scott Corley of the United States District Court for the Northern District of California granted Qualcomm's motion for summary judgment in its entirety:

In Re: Qualcomm Antitrust Litigation (case no. 17-md-02773-JSC, N.D. Cal.): Order re: Motion for Summary Judgment (Public Redacted Version)

This here is a legal victory that should put all of that U.S. antitrust litigation from the late 2010s to rest (short of a successful appeal, but chances are so slim that I guess an appeal will not even be brought). In economic terms it is, however, pretty unimportant compared to the fact that Apple, due to its failure to make its own iPhone-grade baseband processor, had to extend the chipset purchasing agreement with Qualcomm by another three years (2024-2026), which presumably means that Apple exercised an option to extend its standard-essential patent royalty payments as well. In the alternative (if Apple had been able to replace Qualcomm's chips), Apple might have tried to renegotiate those SEP licensing terms.

Things are going well for Qualcomm, and ultimately I believe the company will be able to deal with whatever impact the proposed EU SEP Regulation--in whatever form it may or may not be passed into law--will have.

As for Judge Corley's reasoning, the key elements are that there was really not even the slightest substance to claims that an agreement with Samsung had any market foreclosure impact. And even with respect to Apple, there was no credible pass-through theory (of elevated costs). The final part ("Conclusion") of the order granting the motion to dismiss essentially says that the class-action lawyers made their strategic choices. The initial choices (very much about "No License, No Chips" and allegedly supra-FRAND SEP royalties) didn't work out when the Ninth Circuit reversed the FTC's trial win. Later on, they still tried to get something out of this by suing Qualcomm over exclusive dealing. They presented a new expert report "though the Court had expressly declined to reopen expert discovery." Judge Corley declined to "open the flood gates to prolonged do-over litigation" as opposed to the speedy, efficient, and just resolution that the Federal Rules of Civil Procedure seek to ensure.

This outcome makes sense to me. As I noted further above, I predicted that the shifting-sands case wouldn't make it to trial.

Class actions can serve useful purposes. They can raise issues and promote justice. However, the vast majority of class actions I see in the technology industry are just opportunistic attempts by lawyers to extract settlements from large corporations. Qualcomm probably could have "settled" that class action at a far lower cost than that of its world-class defense. But once you do that, others will come and sue you as well. Qualcomm made the right choice and has now (again, absent an unlikely reversal on appeal) defeated this class action (or, more precisely, consolidated set of class actions).

The order to dismiss the Qualcomm class action(s) came one day after Judge Corley also made a decision (in a class-action matter that does not involve Qualcomm but also followed an FTC action) relating in part to yours truly's communications with Microsoft:

DeMartini et al. v. Microsoft (case no. 22-cv-08991-JSC, N.D. Cal.): Order Re: Discovery Dispute Joint Letter

Let me just refer you to an article about this odd sideshow of the Microsoft-ActivisionBlizzard merger case by Stephen Totilo of Axios Gaming.

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MPEG LA settles patent enforcement actions against former pool contributor Samsung Electronics--but contract dispute apparently continues in NY state court

Patent pool administrator MPEG LA just announced (PDF) that "the HEVC enforcement actions brought in [the Dusseldorf Regional Court] against Samsung Electronics GmbH ('Samsung') announced on 28 March 2022 [...] have been settled with the taking of licenses. As a result, all legal disputes related to those patent enforcement actions have been resolved."

I commented on that March 28, 2022 announcement on the same day. What made it so noteworthy is that it was potentially the first dispute ever in which a pool's former licensor was sued for becoming an allegedly unwilling licensee.

So the parties have put the infringement actions behind them (which is another success story for MPEG LA's common counsel of record in Dusseldorf infringement actions, Axel Verhauwen of Krieger Mes and Gottfried Schuell ("Schüll" in German) of Cohausz & Florack).

But the announcement does not mention the contract lawsuit (PDF) brought by Samsung in a New York state court last May. I've checked the docket, and just at the beginning of this week, Samsung filed its opposition to a motion to dismiss by MPEG LA. There is no notice of voluntary dismissal on the docket, which together with the careful wording of today's announcement leads me to believe that they have not (yet) been able to agree on that part. That case is a royalty dispute. Samsung argues that MPEG LA is not paying the full amount of royalties the Korean electronics giant deems itself entitled to.

Two other companies who left MPEG LA and contributed their patents to Access Advance's HEVC Advance pool (ETRI and SK Telecom) are also suing MPEG LA over that question in New York state court. That case is essentially about whether MPEG LA licensees who signed up before a given licensor left the pool are licensed not only to HEVC-essential patents obtained before, but also to those obtained after the period during which the patentee in question was an MPEG LA licensor.

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Samsung joins Avanci's automotive standard-essential patent pools as licensor (in addition to previously announced participation in Avanci Broadcast)

Avanci just announced that "Samsung Electronics has become a licensor for several of its licensing programs, including Avanci Vehicle 4G, Avanci Aftermarket and Avanci Broadcast." IAM has already reported (paywalled).

The part about Avanci Broadcast already became known last month (Avanci announces patent pool for ATSC 3.0 (aka NextGenTV) broadcasting standard that is ubiquitous in U.S. and South Korea: initial licensors hold more than 70% of SEPs). What's new and incredibly significant is that Samsung has now also joined Avanci's automotive pools. Avanci's 4G pool has license agreements in place with virtually the entire automotive industry. In February, Avanci also announced a pool for aftermarket devices (trackers, toll collection, monitoring systems) that are not pre-installed in cars.

Samsung is the largest purely defensive holder of cellular standard-essential patents (SEPs). Despite holding one of the leading cellular SEP portfolios, it has never sued an implementer proactively, and has only countersued over SEPs for retaliatory purposes on two occasions (Apple, Huawei). This is also the first time for Samsung to join a cellular patent pool. The Korean electronics giant has been participating in video codec pools for a while (first MPEG LA, then Access Advance), but has not been among pool licensors who went out to sue unwilling licensees.

In February 2022, LG Electronics--another Korean electronics maker--already joined Avanci. The two factors that made LG such an important addition to Avanci's licensors apply to Samsung as well:

• portfolio size (Avanci already covered a solid majority of all 4G SEPs before Samsung joined, but is even stronger now and gives licensees more value without a rate increase)

  and

• automotive supplier status:

  Samsung's Harman subsidiary (operating as Harman Becker in Europe) makes network access devices (tier 2 of the supply chain) that are incorporated into telecommunications control units (TCUs; tier 1 of the supply chain), which are then incorporated into cars. With most of the world's automotive brands having taken the Avanci license, the vast majority of cellular SEPs being in the pool, and with two major tier 2 suppliers on board, it looks like resistance to Avanci's model comes down to only a few tier 1 suppliers such as Continental, whose litigation went nowhere but which continues to engage in Avanci-bashing at conferences.

Samsung's decision to join Avanci is meaningful in so many ways. Given that Samsung is one of the world's largest implementers of cellular SEPs, its conclusion that the pool rate is fair, reasonable, and non-discriminatory (FRAND) serves as further validation. If Samsung had joined on the basis of a deal that gives it cheaper access to other companies' patents for its own devices while nominally charging everyone a higher rate, that would be different--but Samsung makes phones and tablets, not cars.

It also means that Samsung expects to be compensated for the use of its IP. No more free lunch for car manufacturers and those who make connectivity-based aftermarket products.

This also has a policy dimension. The European Commission's draft SEP regulation and the draft version of the impact assessment that will accompany the legislative proposal reflect an about-face on the question of patent pools. Today's news, however, shows that pools can streamline the licensing process, while the Commission's ideas would have the opposite effect.

Everyone interested in the subject of cellular SEP licensing wants to know who the initial licensors of Avanci's upcoming 5G pool will be. Today's announcement does not mention 5G, but why would Samsung join only the 4G pool if the 5G pool could be announced anytime? We will see, but my guess is they will be involved in that one, too. This here looks like a strategic decision.

Samsung's main rivals are Apple and Xiaomi. Apple is lobbying aggressively for that EU regulation, hoping to slow-roll and complicate SEP enforcement. Most of the cellular SEPs that Apple owns are not "homegrown" patents, but were acquired from Nortel and Intel. Xiaomi has a growing SEP portfolio, and is also working on an electric vehicle. Neither Apple nor Xiaomi are Avanci licensors as we speak. But there was a time when Samsung also didn't seem to have the profile of an Avanci licensor, and now it has become one, which demonstrates Avanci's integrative force.

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Patent licensing firm IPCom announces settlement with LG while litigation against Samsung apparently continues

IPCom, a well-known patent licensing firm based in the Munich area, today announced on its website a settlement agreement with South Korea's LG Electronics. All infringement cases and validity challenges pending between the two have been withdrawn. IPCom's managing director Pio Suh is quoted in the press release as "confirm[ing] that LG and IPCom have finally reached a resolution that also includes all of IPCom's assets."

Several years ago it became known that an IPCom affiliate named FIPA was suing both Samsung and LG over patents formerly owned by Hitachi. Samsung was known to have licensed IPCom's former Bosch patents a long time ago, and the same may apply to LG. There is no indication at this stage of a settlement with Samsung.

In recent years, IPCom has achieved various settlements such as with HTC (after more than 12 years of litigation) and various telecommunications carriers. Its cases against Apple were also withdrawn. IPCom's current management has been consistently positioning the firm as a constructive and cooperative patent holder.

The reference in today's announcement to "all of IPCom's assets" suggests that LG is licensed not only to those IPCom patents that formerly belonged to Bosch and Hitachi but also to IPCom's "homegrown" patents. Starting in the middle of the last decade, IPCom started filing patent applications on its employees' inventions. The timing and the fields of technology make it a possibility that at least some of those patents are 5G-related. Should that be the case, some of the companies who took licenses from IPCom a long time ago may not be licensed to those younger patents, subject to what exactly the capture clauses of those license agreements say. So we may hear more from IPCom in the years ahead.

LG exited the smartphone market two years ago, but the settlement was likely about back royalties for the most part anyway. A license agreement between LG and InterDigital served as the primary point of reference when Justice Mellor made his recent InterDigital v. Lenovo FRAND determination.

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Avanci announces patent pool for ATSC 3.0 (aka NextGenTV) broadcasting standard that is ubiquitous in U.S. and South Korea: initial licensors hold more than 70% of SEPs

From the position of strength of its standard-essential patent (SEP) pool for connected vehicles--though Charles River Associates may not acknowledge the full extent of it--the Avanci brand is expanding into new segments of the patent licensing business. The Avanci Aftermarket pool launched last month and covers connected devices that are not pre-installed in cars. That is obviously an adjacent business area. The new patent pool announced today is named Avanci Broadcast and defined as "a patent licensing platform for the ATSC 3.0 broadcasting standard".

Standard: The Advanced Television Systems Committee (ATSC) standards were developed in the U.S., but have also been adopted in its neighbor countries (Mexico, Canada), and in South Korea. In other parts of the world, such competing standards as DVB and ISDB are more popular, though ATSC 3.0 may be adopted in several additional countries. In 2009, the U.S. made a complete switchover from analog (NTSC) to digital (ATSC) broadcasting of terrestrial TV programming. The latest version, ATSC 3.0, is also referred to as NextGen TV, but not mandatory, though it is technologically superior.

Avanci's press release describes the benefits of ATSC 3.0 over its predecessor version as follows:

"... ATSC 3.0 enables 4K / UHD broadcast with higher frame rates, better color and sound, and other technical improvements over the previous standard. It also works hand-in-hand with content delivered over the internet for services such as customized advertising, on-demand and premium content, and interactivity."

Licensors: The initial group of Avanci Broadcast licensors includes

• South Korean consumer electronics powerhouses Samsung and LG Electronics;

• Japanese consumer electronics icons Sharp and Panasonic;

• ONE Media, a subsidiary of Sinclair Broadcast Group, which according to a recent press release "owns, operates and/or provides services to 185 television stations in 86 markets, owns multiple national networks including Tennis Channel and Stadium; has TV stations affiliated with all the major broadcast networks and owns and/or operates 21 regional sports network brands"; and

• South Korean research firm ETRI and U.S. licensing firm Sun Patent Trust.

Avanci estimates that those patent holders "represent more than 70% of all patent families containing ATSC 3.0 declared essential patents," with "the addition of several more licensors in the coming months" apparently being in sight.

It is unusual for a licensor to issue its own press release on the creation of a patent pool, but that is what ONE Media did today. ONE Media's press release touts the technical benefits of ATSC 3.0 in detail and quotes its Executive Vice President Jerald Fritz:

"The ability to offer this remarkable technology to consumer equipment manufacturers in a simple, all-encompassing license, should ease the process of deploying new receiver products to consumers worldwide. We congratulate Avanci for helping shepherd several leading international organizations toward this common goal."

Licensees: Not only does the pool start with broad coverage of the relevant patent landscape but also with an impressive group of initial licensees. Three of those licenses--Samsung, LG, and Sharp--are also licensors, while Sony is mentioned only in its role as a licensee. According to the press release, those companies are "collectively responsible for the vast majority of ATSC 3.0 televisions sold to date." To be clear, the vast majority of TV sets doesn't mean that most of the licensing work is already done. It could be that some lower-cost TV makers will be harder to convince, and TV sets are not the only type of device to implement the ATSC 3.0 standard. Think of set-top boxes, for instance.

Pricing: The base per-unit royalty rates per TV or set-top box are stated on the Avanci Broadcast webpage. The price matrix there incentivizes signing up early, with the lowest rates applying to license agreements signed by May 31, 2023 ($2.10 per unit for 2022-2025, $2.40 for 2026-2028). Those who sign up after May 31, 2023, but still within six months of shipping their first ATSC 3.0 product, get a rate of $2.75 through 2028, which is less than the $3.00 per unit (through 2028) that all those who sign up after May 31, 2023 and more than 6 months after shipping their first ATSC 3.0 product.

Management: Besides Avanci founder, the press release also quotes the executive in charge of Avanci Broadcast, who is none other than Ilkka Rahnasto of Nokia fame.

Two pools: MPEG LA, which has been a top-notch patent pool administrator for a long time, was first to launch an ATSC 3.0 patent pool. There's limited overlap with respect to licensors (ONE Media, Panasonic, Sun Patent Trust). Pool administrators operating in good faith can always find solutions to avoid duplicative royalties (be they due to previously existing pools or to bilateral licenses). Whether that is much of a practical issue here is unclear: MPEG LA's list of ATSC 3.0 patent licensees is "To Be Supplied" according to the firm's website.

In general, a single pool for a given standard is in the best position to reach a high market penetration (such as Avanci's connected vehicle pool). Fragmentation can lead to frictional losses and reduced transactional efficiencies. But this is a case-by-case question. When a new pool launches with the momentum that Avanci Broadcast apparently has, then there must have been an opportunity that some market actors thought was best addressed by means of a new pool that has the potential to bring everyone together.

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Chinese network infrastructure maker Datang sues Samsung over six 4G standard-essential patents in Fuzhou Intermediate People's Court

Today a reader made me aware of new standard-essential patent (SEP) litigation activity in China: Datang Mobile is suing Samsung in the Fuzhou Intermediate People's Court over six 4G/LTE SEPs, seeking a total of approximately 120 million RMB (US$17 million) in damages. I did a short LinkedIn post to ask around whether other readers could contribute additional information.

In a November 2022 post on Sisvel's narrowband-IoT pool, Datang was mentioned as a licensor that builds mobile networks. Datang's DTmobile unit is also an Avanci 4G licensor.

I've been provided with a shareholder report that has the following headline:

中信科移动通信技术股份有限公司

关于子公司提起诉讼的公告

Here's a Google translation of the headline:

CITIC Mobile Communication Technology Co., Ltd.

Announcement of Subsidiary's Litigation

That document is dated February 6, 2023. The patent numbers are redacted (2009XX.1, 2012XX.1, 2011XX.3, 2011XX.X, 2010XX.0, and 2009XX.3). The defendants are described as "Samsung (China) Investment Co., Ltd. and other companies".

While Datang's cellular SEPs are not often mentioned in the Western world (basically just in connection with pools), it is a significant 4G and 5G SEP holder. As a network infrastructure maker, Datang understands the implementer's perspective.

About a month ago, Samsung renewed a patent cross-license agreement with Nokia. Two years ago, Samsung had a short-lived dispute with Ericsson. Samsung's licensing team often manages to avoid litigation.

The damages amount Datang is seeking in the aggregate of those six Chinese cases is almost certainly not what the dispute is really about. Datang holds many more patents, and particularly also plenty of patents outside of China. Furthermore, it has apparently requested an injunction.

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Google's Android compatibility rules likely dictate patent infringement by device makers: patent trial scheduled for late June has ecosystemic implications

It's been about eight months since I reported on K.Mizra v. Samsung, a patent infringement case pending with the Landgericht Düsseldorf (Dusseldorf Regional Court) over a patent on a method to predict the remaining battery runtime of a mobile device.

I've checked on the status of that litigation again, and a spokeswoman for the Dusseldorf court has meanwhile confirmed that the trial (case no. 4c O 27/22; Presiding Judge: Sabine Klepsch) will be held on June 29, 2023. I would recommend to Samsung's competitors--other Android device makers--to dispatch lawyers and keep an eye on this case. Samsung may be the first company that has to defend itself against this patent, but my research indicates that Google requires all Android device makers to implement that kind of power consumption analysis.

The patent licensing firm that is asserting EP2174201 on a "method and system for predicting the power consumption of a mobile terminal" means business: last summer they won an infringement ruling in Munich against Niantic, the Google-Nintendo joint venture behind the popular Pokémon GO mobile game, over another patent that equally resulted from the research efforts of a reputable and sizeable Dutch organization named TNO (Nederlandse Organisatie voor Toegepast Natuurwetenschappelijk Onderzoek; Netherlands Organisation for Applied Scientific Research).

What I find particularly interesting here is that Google contractually obligates Android device makers to take certain technical measures that--according to my understanding of the patent--likely result in acts of infringement. Google's Android compatibility rules have drawn regulatory scrutiny, particularly in the EU and India. The Competition Commission of India put it bluntly: device makers choose "between signing a non-negotiable [contract] and commercial failure." This blog is critical of Google's abuse of market power in various ways, but with respect to compatibility rules, I've consistently advocated distinguishing between specifications that clearly are in the interest of consumers and/or app developers, and those that use "(anti-)fragmentation" or other pretexts for exclusionary practices, such as by disadvantaging rival app stores, search engines, or map services.

The compatibility rule at issue here is non-abusive: no exclusion, self-preferencing, tying, or other market distortion. Apart from the infringement problem I'll discuss below, its effects are purely positive:

• Users want to plan when and where to recharge their phones.

• Device makers strives to provide the best user experience (UX) possible.

• Google's Android competes with Apple's iOS on UX.

• App makers like me know that if our software is a "power hog" (a term also used by Qualcomm in an interesting paper on the subject), some users may find out about it or read or hear about it, and delete our apps for that reason. In the worst case we face a stern warning from the gatekeeper--Google--that an app will be ejected from the Google Play Store unless a problem of excessive power consumption is addressed.

  When we make apps, we obviously take a look at power consumption as we test pre-release versions of our software. It's pretty normal that an app is a power hog during the early stages of development, but energy efficiency is one of the most important aspects of optimization. As developers we know that our own usage pattern may differ greatly from real-world usage. That's why it's important that what the actual end users do is analyzed locally by Android. Google's Android Compatibility Definition (ACD) says:

  A more accurate accounting and reporting of the power consumption provides the app developer both the incentives and the tools to optimize the power usage pattern of the application.

Google ensures that Android device makers measure and provide data points relating to power consumption. It's about the power drain (per unit of time) of what in the claim language of the patent-in-suit is called a "terminal activity", such as WiFi data transfers, cellular data transfers, CPU usage for certain computations, or using a display in ambient mode. Device makers presumably perform such measurement under laboratory conditions and generate a "per-component power profile" as Google calls this in its Android Compatibility Definition (ACD).

Those data points are then used on a device for the purpose of predicting the remaining battery runtime based on a user's particular usage pattern, which naturally evolves as a given user's preferences change and new apps (or new version of existing apps) may drain more or less battery power. Android keeps track of what in the claim language is called "user activities" such as watching a video, downloading a document, placing a voice call, or playing a particular game. Android also knows what terminal activities a given user activity involves. Based on

• the terminal activities that different user activities entail,

• a given user's usage pattern, which will trigger a particular mix of terminal activities, and

• the power consumption of the various hardware components (found in the per-component power profile I mentioned before),

Android can then estimate the per-time power consumption during the remainder of the current battery cycle and, ultimately by a simple division, derive the remaining battery runtime.

Those non-negotiable Android compatibility rules are publicly accessible:

Handheld device implementations:

• [8.4/H-0-1] MUST provide a per-component power profile that defines the current consumption value for each hardware component and the approximate battery drain caused by the components over time as documented in the Android Open Source Project site.

• [8.4/H-0-2] MUST report all power consumption values in milliampere hours (mAh).

• [8.4/H-0-3] MUST report CPU power consumption per each process's UID. The Android Open Source Project meets the requirement through the uid_cputime kernel module implementation.

• [8.4/H-0-4] MUST make this power usage available via the adb shell dumpsys batterystats shell command to the app developer.

• [8.4/H] SHOULD be attributed to the hardware component itself if unable to attribute hardware component power usage to an application.

If Handheld device implementations include a screen or video output, they:

• [8.4/H-1-1] MUST honor the android.intent.action.POWER_USAGE_SUMMARY intent and display a settings menu that shows this power usage.

A section of the Android documentation is dedicated to Power Profiles for Android. Among other things, it says:

"Resource consumption is associated with the application using the resource. When multiple applications simultaneously use a resource (such as wakelocks that prevent the system from suspending), the framework spreads consumption across those applications, although not necessarily equally."

Further above I mentioned last year's Pokémon GO (Niantic) patent infringement ruling. That game is a good example of an app that uses multiple hardware components: data transfers (sometimes WiFi, sometimes cellular), camera, display, sound. Augmented reality is a resource-intensive type of application, so the makers of such an app must to make a significant optimization effort to prevent it from becoming a power hog. They need the kind of data that Android can provide by virtue of apparently implementing what the patent-in-suit covers.

While Samsung and Niantic are not affiliated, there are some interesting parallels. Both cases were brought by K.Mizra, both patents were originally obtained by TNO, and Google makes the allegedly infringing software (Android in the Samsung case, the cloud components at issue in the Niantic case). The relationship between Google and either defendant is different, however: Google is a major shareholder in Niantic, while it has imposed its compatibility rules on Samsung, including the mandate of power consumption profiles that has apparently given rise to the Dusseldorf patent enforcement action.

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Nokia announces 5G patent license agreement with Samsung: details unknown, 'multi-year period'

Nokia just announced a new patent cross-license agreement with Samsung. The previous agreement expired "at the end of 2022" according to Nokia's press release; the new contract term starts on January 1, 2023, and "Samsung will make payments to Nokia for a multi-year period."

The last announcement of a Nokia-Samsung renewal was about four years ago. Prior to that one, the parties agreed to have the financial terms set by an arbitration panel (which is what Samsung recently agreed upon with InterDigital). So far, Nokia and Samsung have always been able to avoid infringement litigation.

Nokia's press release contains the following quote from Jenni Lukander, President of Nokia Technologies:

"Samsung is a leader in the smartphone industry, and we are delighted to have reached an amicable agreement with them. The agreement gives both companies the freedom to innovate, and reflects the strength of Nokia’s patent portfolio, decades-long investments in R&D and contributions to cellular standards and other technologies."

In September, Mrs. Lukander gave a presentation in New York City, explaining Nokia's IP strategy (particularly also its growth strategy) to financial investors and analysts. She said that Nokia was facing the need to renew various license agreements in the fiscal quarters ahead. Certainly Samsung was a major item on the list, and that one has been crossed off in a positive way for Nokia.

Samsung is known to negotiate hard, but constructively. It is interesting to see that the parties kept negotiating for another three weeks after the expiration of the previous agreement instead of resorting to litigation. By contrast, Nokia sued OPPO a couple of days after the previous license agreement expired in mid-2021.

In December it became known that Samsung recently (and silently) extended its patent license agreement with Huawei, a company that has become a net licensor without even treating patent licensing as a strategic business area.

What is unknown is when Nokia's current patent license agreement with Apple will expire. From industry circles and analysts I've heard different views. According to some people, the agreement would have expired last summer, but Nokia's numbers don't suggest that Apple stopped paying. Currently, the most likely dates of expiration would be the end of this year or the middle of next year, given that the last renewal was in mid-2017 (and the related agreement had expired at the end of 2016).

The biggest renewal problem that Nokia is facing as we speak is the situation with OPPO. Nokia has recently lost more decisions than it won. Where Nokia has leverage, OPPO has left the market; where OPPO sells large numbers of phones, Nokia lacks leverage so far. Nokia accuses OPPO of hold-out, and OPPO gave Juve Patent the following quote:

"OPPO has committed to enter into a licence with Nokia on the FRAND terms that the Chongqing court will set in the ongoing rate setting proceedings between the parties. Nokia has so far been unwilling to renew its licence with OPPO on fair and reasonable terms. However, OPPO hopes that Nokia will now fully engage with the Chongqing proceedings and confirm that it will honour its FRAND undertaking by similarly committing to enter into a licence on the terms set, in order that this dispute can be brought to an end."

Nokia is also embroiled in litigation with vivo, another Chinese smartphone maker that has a limited presence in Europe and largely serves other geographic markets.

The terms on which Nokia agreed with Samsung are unknown, and Samsung's gadgets have a higher average price than OPPO's and vivo's products, which is why I can't tell whether the agreement announced today will impact Nokia's negotiations with OPPO and vivo, such as the Chinese FRAND determination case that is underway in Chongqing.

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InterDigital announces arbitration agreement with Samsung, renewal with Panasonic, video codec license deal with LG

This morning, publicly-traded patent licensing firm InterDigital (NASDAQ:IDCC) announced license agreements with three major East Asian companies:

• The most important one of those press releases involves consumer electronics giant Samsung--a company whose licensing department is known to be tough, but definitely effective. It was no secret that the previous license agreement was set to expire on December 31. Ten years ago, InterDigital brought infringement lawsuits against Samsung. This time around, it's a renewal with final terms to be decided by binding arbitration. InterDigital CEO Liren Chen commented on this suboptimal but apparently acceptable solution:

  "While we always prefer to conclude our license agreements through amicable good faith negotiation, independent binding arbitration provides an effective mechanism for resolving licensing disputes. I welcome Samsung’s willingness to enter into a new license with us and their commitment to work through the remaining issues in arbitration."

  An InterDigital filing with the Securities and Exchange Commission is more specific, though it still doesn't answer my most important questions:

  "On January 1, 2023, InterDigital, Inc. (the 'Company') and Samsung Electronics Co. Ltd. ('Samsung') agreed to have a panel of arbitrators establish the royalties to be paid by Samsung for a worldwide license to certain of the Company’s patents from and after January 1, 2023, as well as any other terms to a patent license agreement on which the parties are unable to agree. The determination by the panel will be in the form of a patent license agreement and will be final, binding and non-appealable, subject to certain limited exceptions. The parties have agreed to conduct the arbitration in a diligent manner. The Company expects the arbitration to conclude within approximately 18 months.

  "Each of the parties has also agreed not to initiate certain claims against the other party during the arbitration. Any licenses under our joint licensing program with Sony relating to digital televisions and standalone computer display monitors will not be included in the scope of the arbitration."

  Arbitration is inherently opaque. We'll likely never find out what parameters the parties gave the arbitrators. What we may be able to deduce from InterDigital's quarterly financial reports is whether Samsung continues to make some payments in the meantime. It's possible that the parties agreed on a certain amount that Samsung will pay per quarter while still reserving its rights to take the position in arbitration that the royalty rate should actually be lower.

  Ten years ago, Samsung also agreed with Nokia on arbitration to determine the royalty amount, though it was unclear what subset of patents was subject to arbitration. Third parties who believe to know the terms of the deal mostly suspect that the arbitration result fell short of Nokia's expectations--but again, this depends on the parameters, which can favor one side or the other, or provide a level playing field.

  At some point some news of a Nokia-Samsung renewal or, failing that, infringement litigation should also surface, but I don't know when that agreement expires.

• Panasonic renewed its DTV and HEVC patent licenses with InterDigital. Unlike the scope of the InterDigital-Samsung arbitration, the Panasonic deals also involve some Sony patents, as InterDigital's Chief Licensing Officer Eeva Hakoranta said that the DTV deal was signed under a "joint digital TV licensing program which continues to deliver considerable value to InterDigital, [its] partner Sony, and to [its] licensees."

• The announcement of InterDigital's HEVC and VVC video codec patent license agreements with LG Electronics sounds like a new license (covering LG's TVs and PCs) rather than a renewal, but this may be due to the fact that the Korean company exited the smartphone business, which according to a February 2018 press release had a license to InterDigital's patents. It could be that the only reason the new deal is not called a "renewal" is that it no longer involves cellular SEPs.

In the summer, InterDigital announced a license agreement with Amazon, and in early October a renewal (by seven years) of its license deal with Apple. InterDigital is, however, embroiled in litigation with a couple of companies. The more important one of them is OPPO, which fights hard when sued but prefers to reach license agreements on reasonable terms, such as very recently with Huawei. InterDigital is now also waiting for a UK court ruling in its SEP dispute with Lenovo.

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MPEG LA seeks dismissal of ETRI, SK Telecom complaint threatening 'the utility, benefit, and public trust underlying [patent] pool licenses': Supreme Court of the State of New York

If litigants try a long shot, it may every once in a while contribute to the evolution of the caselaw. At times, the term "long shot" is a euphemism, especially when a complaint goes against a crystal clear contract. Deutsche Telekom's "antitrust" action against patent licensing firm IPCom was thrown out by the Mannheim Regional Court six months ago as I had predicted. At least Deutsche Telekom didn't deny that the contract said what it said (they waived their right to bring antitrust claims over how other implementers would be treated later): Deutsche Telekom "only" argued that an unambiguous written commitment, made when no injunction was in force or imminent, should be held unenforceable anyway.

Worse than that, the Electronics and Telecommunications Research Institute (ETRI) and SK Telecom brought a suit in September that comes down to claiming that the relevant contract--an agreement among patent pool contributors--doesn't say what it says. The two are suing MPEG LA--a patent pool administrator in good standing that has been around for more than a quarter century (Wikipedia article)--in the Supreme Court of the State of New York (County of New York, case no. 653232/2022, Electronics and Telecommunications Research Institute (ETRI) and SK Telecom Co., Ltd. v. MPEG LA, LLC (PDF)). ETRI and SK Telecom accuse MPEG LA of "falsely claiming to license to others hundreds of valuable patents owned by ETRI and [SK Telecom] when MPEG LA has no right or authority to do so"--but as I'll show further below, that's preposterous. If they won against all odds and common sense, a large number of MPEG LA licensees--from numerous small companies to the likes of Xiaomi--would subsequently face duplicative royalty demands and potentially infringement litigation over patents they are lawfully using (and paying for) under an existing pool license.

It's an attack on a bedrock principle of the patent pool system: that licensees can rely on being licensed to all patents that are essential to the relevant standard and belong to any of the licensors of a pool from which they take a license. I don't understand why two companies who contribute to various pools (with SK Telecom presumably also having taken many pool licenses) decided to bring that complaint, apart from being virtually certain to waste money on legal fees. They are making themselves ridiculous because of the absurdity of their theory and at the same time untrusthworthy:

• How can other pool managers trust ETRI and SK Telecom that they won't challenge unambiguous clauses in other patent pool agreements?

• How can licensees trust that if they license ETRI and SK Telecom patents from a pool, they won't later be sued over those patents (unless they pay again, and possibly a lot more than they paid the first time)?

Case overview

Patent licensing is a complex business, so there could be a legitimate question of contract interpretation here, right? Actually...no. One does have to read the Agreement Among Licensors Regarding the HEVC Standard that ETRI and SK Telecom attached to their complaint as Exhibit 3 (PDF). Then it's pretty clear that the issue the complaint attempts to make up simply doesn't exist.

ETRI and SK Telecom left the MPEG LA HEVC pool about three years ago (and instead joined Access Advance's HEVC Advance Pool, as did some other Korean companies, most notably Samsung). The complaint says: "For ETRI, termination became effective on January 2, 2020. For [SK Telecom], termination became effective on January 27, 2020."

What does such termination mean for licensees? One distinction is really key:

• timely licensees (those who signed up before termination taking effect)

  vs.

• tardy licensees (those who signed up after termination became effective)

"Timely licensees" and "tardy licensees" is just how I call them here.

The problem is that ETRI and SK Telecom emphasize another distinction, which one can make for academic purposes but which ultimately changes nothing about the contractual situation:

• pre-termination patents (HEVC-essential patents of which ETRI and SK Telecom became owners before termination taking effect)

  vs.

• post-termination patents (HEVC-essential patents of which ETRI and SK Telecom became owners after termination became effective)

A two-by-two matrix shows what the dispute is about, i.e., whether a given MPEG LA licensee is licensed to certain ETRI and SK Telecom patents:

	Timely Licensees	Tardy Licensees
Pre-Termination Patents	licensed (undisputed)	not licensed (undisputed)
Post-Termination Patents	MPEG LA says: licensed ETRI/SK say: not licensed	not licensed (undisputed)

In other words, tardy licensees get no benefit with respect to any of ETRI's and SK Telecom's patents; timely licensees remain licensed under pre-termination patents; and the question is now whether a timely licensee remains licensed to ETRI's and SK Telecom's HEVC portfolios including post-termination patents.

On November 7, MPEG LA brought a motion to dismiss (PDF). Contract interpretation is a matter of law, and if the contract is clear, the case must go away, based on documentary evidence alone.

The first contract clause to look at here is § 2.3 of the Agreement Among Licensors:

"Non-Exclusive Licenses or Sublicenses. Each [Licensor] shall hereby grant to [MPEG LA and any successor] a worldwide, nonexclusive, non-transferable license or sbulicense under all HEVC Essential Patents, which the [Licensor] and its Affiliates presently or in the future [emphasis added] has the right to license or sublicense (without payment to any third party which is not an Affiliate), with a right of [MPEG LA] to grant sublicenses which are identical in form to the sublicense in Attachment 1 hereto [i.e., the pool license agreement]. ..."

What does the termination clause (§ 7.2) say?

"Voluntary Termination. At any time after January 1, 2020 each [Licensor] shall have the right, effective upon thirty (30 days' written notice [...], to terminate with respect to itself all but not less than all of the following: (1) this Agreement [Among Licensors]; (2) the right of [MPEG LA] to grant additional sublicenses [i.e., pool licenses] (excluding renewals of sublicenses existing at such time) under its license or sublicense granted by such terminating [Licensor] pursuant to Section 2.3 herein; and (3) the Licensing Administrator Agreement entered into pursuant to Section 2.2 herein. [...] For the avoidance of doubt, such termination shall not affect the grant of the license, including renewals, or sublicenses contemplated pursuant to Section 2.3."

MPEG LA's motion to dismiss notes that ETRI and SK Telecom's complaint doesn't even quote the key passages, such as the "For the avoidance of doubt" part ("shall not affect the grant of the license, including renewals. Instead, the complaint makes it sound like "additional sublicenses"--which just means that MPEG LA can't give subsequent licensees any license to patents owned by licensors who have left--also included cases in which a timely licensee becomes licensed to post-termination patents.

Xiaomi is a great example here. Their license agreement with MPEG LA was announced (PDF) on January 9, 2020. Let's assume that the announcement wasn't delayed too much after the signing of the agreement, then they presumably became an MPEG LA HEVC licensee after ETRI's effective termination date, but undoubtedly prior to SK Telecom's. If Xiaomi or MPEG LA claimed that Xiaomi was licensed by MPEG LA to SK Telecom's HEVC patents, that would presumably be wrong, and I could see a case for declaratory judgment. But Xiaomi clearly got a license to all of SK Telecom's HEVC patents, including the ones SK Telecom obtained after termination ("in the future" as Section 2.3 as said). If SK Telecom was granted an HEVC-essential patent in, say, February 2020, Xiaomi is licensed, and the "For the avoidance of doubt" part applies--including that Xiaomi can perpetually renew its MPEG LA license agreement without losing those benefits.

Policy considerations

Implementers understandably expect legal certainty--peace of mind--with respect to the standard-essential patent (SEP) portfolios of the licensors they see on the list when they take a license. Why take a pool license at all if you may still face royalty demands and infringement litigation over patents from a party with which you thought you already had a deal in place?

Pools provide transactional efficiencies, but they can only do so with reasonable legal certainty.

ETRI and SK Telecom have a problem: anyone who negotiates an HEVC Advance license (a pool they joined because they thought they'd get a better deal than from MPEG LA) but already has a (timely) MPEG LA license will argue that certain parts of the Advance pool must not be paid for again. Access Advance--through its licensors that were asserting patents against Vestel--lost a case in Dusseldorf about a year ago because of the duplicative-royalties issues.

They're now trying a Hail Mary in a New York state court.

Another South Korean company, Samsung, also filed a lawsuit against MPEG LA there: a complaint (PDF) over royalty redistribution. Various cases by MPEG LA licensors against Samsung are pending in Dusseldorf. I don't want to disgree into the Samsung situation here. The cases aren't identical, but the root cause is the same and the issues are at least adjacent--and the complaints similarly meritless, though ETRI and SK Telecom's complaint has set a new absurdity record.

What Samsung has in common with ETRI and SK Telecom is the root cause of their grievances: they thought it was a smart move to join the Access Advance pool and leave the MPEG&nbspM;LA pool, and it's not going well. There are potential signs of piecemeal resolution by licensees such as Xiaomi, taking bilateral licenses rather than a pool license.

Those companies wish they could have left MPEG LA without existing licensees retaining any kind of license. But that's not what the contract says, nor would it be good policy. MPEG LA notes that what is at stake here is "'the utility, benefit, and public trust underlying [patent] pool licenses'."

The issues even go slightly beyond patent pools. Capture clauses in bilateral license agreements frequently include patents to be granted or acquired after certain key dates. Many bilateral license agreements resulting from individual negotiations as opposed to a standard agreement being signed by many parties. That is an important difference, but it is always unacceptable when licensors try to get out of their commitments in hopes of being able to charge more.

Federal courts deal with patent license agreements all the time because of license-based defenses to patent infringement complaints. State courts do have jurisdiction over contract law, including patent-related agreements, but don't see the practical implications in infringement cases. I suspect that ETRI and SK Telecom just hope that a state court can be fooled by them, but the contract language appears too clear--and the Supreme Court of the State of New York (County of New York) does adjudicate interesting commercial disputes on a daily basis. So my prediction is that the complaint will be dismissed.

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Solomonic ITC staff says Apple should not win untailored U.S. import ban in case it proves Ericsson's infringement of mmWave patents: carriers and consumers would be impacted

On Wednesday, two Ericsson v. Apple patent infringement hearings in Munich couldn't go forward (someone called in sick). There will be a couple of other such hearings next Wednesday as the court told me, and the court may then discuss with counsel when to hold the two postponed hearings. The most interesting Ericsson v. Apple hearing in Munich is still scheduled for December 21 and will be focused on FRAND.

Meanwhile the United States International Trade Commission (USITC, or just ITC) has uploaded to the agency's electronic docket the public redacted versions (filed with the agency on Wednesday) of Apple's, Ericsson's, and the Office of Unfair Import Investigations' (OUII, commonly referred to as the "ITC staff") prehearing briefs ahead of next month's evidentiary hearing (i.e., trial) in a case in which Apple is seeking a U.S. import ban on Ericsson's base stations over three mmWave-related patents.

On Wednesday it became known that Apple even opposes mobile telecommunications carriers' right to repair. Apple asked Administrative Law Judge (ALJ) Monica Bhattacharyya of the United States International Trade Commission (USITC, or just ITC) to strike Ericsson's argument (which Apple argues was made untimely) that any exclusion order Apple might win should, at minimum, feature a "service and repair" carve-out.

The three pre-hearing briefs shed more light on the parties' argument. Obviously, the private parties take positions at the opposite end of the spectrum:

Apple wants to make maximum impact on Ericsson's business and wants an immediate and untailored import ban:

ITC Investigation No. 337-TA-1302: Apple's prehearing brief

Ericsson argues that mmWave is really critical: "Because mmWave has a shorter geographic range than other technologies, it is targeted to more densely populated areas, such as urban and suburban areas, and to applications that require high density connectivity, where the benefits of high speed and low latency can be maximized for the most users in a smaller geographic area." Should any exclusion order issue nonetheless, it should come with "at least a two-year delay to enforcement of any remedial orders to allow U.S. network operators time to attempt to put viable alternatives into place" and with the carve-out for service and repair that I mentioned further above, as well as a certification provision "to certify to Customs that the components in question were either (a) accused but found to be non-infringing and/or (b) to be used in non-Accused Products":

ITC Investigation No. 337-TA-1302: Ericsson's prehearing brief

It comes as no surprise that the private parties disagree. So what does the ITC staff say? Here's its really interesting brief on public interest and remedy:

ITC Investigation No. 337-TA- 1302: Commission Investigative Staff's Prehearing Brief

The ITC staff recognizes the importance of protecting intellectual property, but "the evidence will demonstrate that an untailored remedy would have troubling adverse effects on competitive conditions among network providers and between different geographic regions of the United States, as well as on U.S. consumers in regions currently served by Ericsson mmWave equipment." The ITC staff does not see that Nokia and Samsung can easily replace those components, and Ericsson explains in its brief that depending on the level of customization, it can take years to mix infrastructure products from different vendors in a given location. Also, the ITC staff notes that a redacted (but apparently significant percentage) of the accused Ericssion based stations "produced in the United States in Lewisville, Texas, using components imported from Estonia"--and, by contrast, "there will be no evidence that any Nokia or Samsung mmWave cellular base station communication equipment (or components thereof) is manufactured in the United States."

The Staff appears to lend significant credence to expert testimony that "three types of consumers [...] will be most affected by a delay in the rollout of mmWave capabilities: 1) those utilizing mmWave 5G in congested areas, such as dense urban cores, stadiums, and airports and transit hubs; 2) those reliant on ultra reliable, low-latency applications, such as Chicago’s Rush University Medical Center; and 3) those relying on fixed wireless access ('FWA')." A footnote explains that "FWA enables network operators to provide a broadband internet experience throughout a customer’s location via a cellular network instead of via fiber, cable satellite, or telephone lines."

Then the ITC staff makes a distinction based on whether a given area is already serviced by Nokia and Samsung base stations or not:

"[T]he potential harm to U.S. consumers runs parallel to the harm to competitive conditions, in that the 45 million consumers in areas currently serviced by Ericsson mmWave equipment would bear the brunt of any loss of, or delay in the development of, mmWave capabilities, while consumers in areas serviced by Nokia and Samsung would be largely unaffected."

The ITC staff then "proposes a carve out that would allow network providers to continue to purchase Ericsson Accused Products for installation in geographic areas where existing Ericsson equipment is already physically installed as of the effective date of the Commission’s remedial orders:"

"Under the Staff’s proposed exemption, Ericsson would not be permitted to sell or service Accused Products for installation in any area currently served by another supplier of mmWave cellular base station communication equipment or in any area that does not already have mmWave 5G service. Within areas already served by Ericsson mmWave equipment, however, the carve out would enable Ericsson to repair or replace existing equipment, to upgrade installed mmWave equipment, to add mmWave equipment to an existing 4G installation using Ericsson equipment, and to in-fill its existing territories with a greater density of mmWave installations. In other words, Ericsson would be able to keep mmWave service within existing 'Ericsson' territories on par with mmWave service offered in other regions of the United States, but would not be allowed to import Accused Products for the purpose of expanding the geographical borders of those territories beyond the status quo."

Therefore, the ITC staff says "any remedy should be tailored to permit Ericsson to continue to sell and service Accused Products for installation in geographic areas where existing Ericsson mmWave equipment is physically installed as of the effective date of the Commission’s remedial orders."

I'm not taking a position on who's right, just on whether certain positions can be taken on a reasonable basis. The ITC staff's recommendation strongly suggests that what Apple wants goes too far. The question is then whether the staff's Solomonic proposal is the answer, or whether some further modifications such as a grace period are needed--and whether the fact that Ericsson actually does make equipment in the U.S. should be given more weight as it is really the ITC's task to protect any domestic industry. I'd rather wait until the carriers (with Verizon having invested particularly heavily in Ericsson equipment according to the ITC staff) file their public interest statements at a subsequent procedural stage. For the time being, however, the ITC staff's approach is a noteworthy development in its own right.

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Nokia's non-smartphone patent revenues (automotive, video/audio, IoT) have become significant and will continue to grow fast while various smartphone license deals are up for renewal

Yesterday, Nokia's IP chief (official title: President of Nokia Technologies) Jenni Lukander gave a presentation in New York City to financial investors on the evolution of Nokia's licensing revenues:

It was my pleasure to talk to our investors in NYSE🇺🇸 about why we are well positioned for success in Nokia Technologies. https://t.co/YExopKE6Ij

— Jenni Lukander (@jelukand) September 9, 2022

I followed the event over the web. Publicly traded companies in the patent licensing businesses often have to reconcile conflicting goals. In its dispute with Apple, Qualcomm wanted to convince the courts that Apple's cessation of royalty payments (through its contract manufacturers) was causing irreparable harm--while seeking to assure investors of its strong position. Nokia doesn't have to contradict itself like that: no inconsistencies for now. But I did sense that the presentation served a dual purpose: Mrs. Lukander apparently sought (and, in my opinion, persuasively managed) to

• demonstrate the strength of Nokia's patent portfolio and mid-term growth prospects in the licensing business (partly by virtue of diversification of the licensee base)

• while cautiously preparing the stock market for potential turbulences that could result from delayed renewals (and, by extension, sending out a strong message to licensees that, if necessary, Nokia will choose delays over devaluation, i.e., go to court if necessary, even though it may result in multiple quarterly misses).

More than once, Mrs. Lukander noted that Nokia was now going through a period in which various major license agreements are up for renewal. Of course, she emphasized that Nokia believes in the strength of its portfolio, which particularly also includes that Nokia can prevail in court, even more so on patents that have already been successfully asserted against other parties. And she didn't say that there were major problems with licensees other than--obviously--the ongoing litigations with OPPO and Vivo. But everyone who invests in, or analyzes, companies with a patent licensing revenue stream knows that renewals aren't always seamless, especially when dealing with the behemoths: Apple and Samsung. For example, Ericsson had to sue Samsung last year, and is suing Apple as we speak.

About a year ago, Bloomberg published an article entitled Nokia’s Patents Chief Gets Pushback in Bid to Make Firms Pay. And the subhead noted that Nokia "seeks to extend [its] smartphone licensing business to IoT."

That diversification of the licensee base into automotive, video/audio, and other IoT segments is not merely an objective, but has already materialized to a noteworthy extent. Yesterday, Mrs. Lukander said the following:

"And to put our progress into context, our business in these new growth areas was negligible in 2018 and has grown to over 100 million euros in the past twelve months."

That is remarkable. It's unclear how much of that comes from the Avanci patent pool, which has recently signed license agreements with ever more of the world's major car manufacturers. I would assume that most of the "over 100 million euros" comes from automotive. Daimler and an unnamed second company took direct licenses from Nokia last year.

There definitely is a fast-growing wireless SEP licensing opportunity in video/audio and over time in other IoT segments such as smart meters.

Dutch ruling in OPPO case

The pending disputes with OPPO and Vivo came up repeatedly. Just two days before Nokia's Wall Street event, a Dutch court--The Hague District Court--entered a 62-page decision in Nokia's favor in a 4G/5G standard-essential patent case. Here's the header section (click on the image to enlarge):

OPPO--through its German subsidiary--had brought a declaratory judgment action over two Nokia SEPs from the same patent family: EP2981103 and EP3220562 on an "allocation of preamble sequences." I often just mentioned EP'103 and also meant EP'562: they're very similar, though it obviously is always better for a plaintiff to prevail on two patents from the same family than just one (but nowhere near as meaningful as prevailing on two patents from different families).

The Mannheim Regional Court granted Nokia an injunction over those two patents in July. The purpose of OPPO's Dutch complaint for declaratory judgment was--rather transparently--just to obtain a favorable decision in order to increase the likelihood of the Karlsruhe Higher Regional Court staying the injunction. Nokia then brought counterclaims, seeking a Dutch injunction--and that's what has now happened.

In order to get a swift decision on the technical merits from the Dutch court, OPPO waived its FRAND defense at that stage. The German appeals court, however, presumably has to decide on FRAND as well.

It's unlikely that the economic impact of a Dutch injunction on OPPO matters, given that OPPO has already stopped selling its devices in the much larger German market. The Dutch low-risk bet didn't work for them but they'll keep on fighting and got two Munich cases stayed earlier this week.

While Mrs. Lukander expressed hopes yesterday that the dispute with OPPO could be resolved soon, I wouldn't hold my breath. As I mentioned in the post I just linked to, IAM's Asia IP Elite report notes that OPPO "has established a reputation as one of the toughest negotiators in the mobile space." Nokia's experience and sophistication in wireless patent litigation are second to none, but Nokia and OPPO are two well-matched adversaries.

Does Nokia's litigation team have the management bandwidth to start additional enforcement actions in the months ahead? I don't doubt it. By mounting stiff resistance, OPPO will likely bring down the royalties it has to pay. For now, Nokia doesn't have leverage in any of the markets in which OPPO sells most of its devices: Germany is a small market for them. Some others are far more vulnerable in Germany--or even in the Netherlands...

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Korea Communications Commission launches 'fact-finding investigation' into Google Play, Apple's App Store, and (local player) ONE store: Google's rejection of KaTalk updates apparently triggered this

It took only one month and two days for my headline according to which Google was on a collision course with the Korean government to be vindicated. I predicted this after Google rejected updates to KakaoTalk (commonly referred to as KaTalk), a messenger app used by about 93% of Korean smartphone users, the reason for those rejections being KaTalk's use of external payment methods (via its website).

The Korea Communications Commission (KCC) teed up today's announcement of a "fact-finding investigation" into three mobile app stores quite nicely, and I'll say further below why I think they're playing it smart. First, here's a report by the Yonhap news agency, according to which the KCC will start a probe in a week from today to look into potential violations of the in-app payment rules the country's legislature adopted last year.

The idea of that legislative amendment was and remains that app developers should be able to bypass Apple's, Google's, and other app store operators' taxes on in-app payments. Korea is not the only jurisdiction in which Apple and Google have made announcements of what constitutes bad-faith pseudo-compliance with rules or regulatory decisions. It has also happened in the Netherlands, where an antitrust decision is being appealed, and Google recently announced such plans with a view to the EU's Digital Markets Act, though it turned out only a few weeks later that the real reason for doing it at this particular time was, presumably, a preliminary investigation by the European Commission's Directorate-General for Competition (DG COMP).

In South Korea, Apple and Google impose a 26% commission on in-app payments processed by third-party payment services, which effectively means that the total cost to a developer of (a) the platform operator's tax and (b) the fees charged by third-party payment processors (which are apparently a bit higher in Korea than in some Western countries, where Apple and Google impose a 27% tax on third-party transactions) is not--or at least no more than negligibly--lower than simply using Google Play Billing for Android or Apple's IAP for iOS apps. As a result, developers have nothing to gain, as they'd need to be able to offer users substantially lower prices in order to convince them to use alternative payment systems--and without the developer losing money on those cheaper transactions, of course.

The Korean law doesn't state specifically that mobile platform operators are not allowed to charge commissions; and it probably couldn't say so, as companies may own valid and enforceable intellectual property rights that entitle them to royalty payments.

There can be no doubt about the spirit of the law: it's about giving app developers choice. Consumers already had the choice of making payments using different credit cards or other payment methods.

Instead of just talking price regulation at an abstract level, the KCC is now going to analyze whether the targets of the investigation are "enforcing certain in-app payment methods and refusing developers who use external payment methods to register and renew their apps on their markets." (quoting Yonhap)

The second part--"refusing developers who use external payment methods to register and renew their apps on their markets"--is precisely what the KaTalk situation was all about. TechCrunch reported in mid-July that Kakao, the company that makes KaTalk, removed its external payment options. Kakao seemingly caved after some short-lived resistance (by contrast, Epic Games' Fortnite was kicked out of Google's and Apple's stores two years ago--almost to the day--and still hasn't returned), but it may now have the last laugh.

I don't mean to suggest that Kakao coordinated this with the KCC. I would, however, assume that Kakao at some point complained to the KCC, and that the KCC appreciates the fact that Google's repeated rejection of updated KaTalk versions gives the regulatory agency some ammunition: there was some actual harm to the developer as well as to consumers, even if only during a short window.

That is just the first of two reasons why I think the KCC teed this up nicely. The other is that it's politically clever to investigate not only Apple (over the App Store) and Google (over the Google Play Store), but also South Korea's large telecommunications carrier, SK Telecom, over its ONE store (yes, the official capitalization is "ONE store"). On the web, ONE store describes itself as "Korea's leading app store."

Going after a local hero in addition to two American behemoths makes it all look a lot more principled than otherwise. No doubt that ONE store would also like to squeeze developers. But ultimately the South Korean economy stands a lot more to gain from opening up mobile payment systems.

Samsung's Galaxy Store is also very significant, but apparently compliant with the new IAP statute. It's also telling that the Galaxy Store became the #1 Fortnite Mobile distribution channel after Google and Apple ejected that game: it means Samsung allows developers some things that Apple and Google don't.

It's not 100% certain at this stage the investigation will lead to further action, but I'd be surprised if the KCC ended up concluding that Apple's and Google's terms and policies--and the implementation of those terms and policies--are compliant. The Telecommunications Business Act would enable the KCC to fine Apple and/or Google to the tune of 2% of their Korean revenues.

The Yonhap report doesn't specifically indicate that the KCC may consider the 26% app tax rate a violation of the country's IAP rules. Maybe the KCC is going to focus on behavioral rather than numerical issues, at least for now--they've got to start someplace. We'll certainly hear from that Korean enforcement action again in the not too distant future. I think there's potential there.

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SHOCKING: Nokia patents, other lawsuits force OPPO, OnePlus out of German market--first smartphone maker in history to exit major market over patent enforcement

The history of phones has been linked to patents ever since Alexander Graham Bell patented the telephone in 1876. One of humanity's dreams materialized. Fast forward 146 years, and nothing short of a nightmare has come true: a very significant phone maker has actually exited--not merely threatened to exit--one of the largest markets in the world--Germany--as a result of patent assertions.

I became aware of this shortly after yesterday's post on two standard-essential patent (SEP) injunctions Nokia had just obtained against OPPO from the Munich I Regional Court. Previously, the Mannheim Regional Court had granted Nokia a non-SEP injunction in June as well as a a SEP injunction (over two patents from the same family) in July.

Nokia may win one or more additional injunctions on Tuesday. OPPO has its own countersuits pending, but those are taking longer.

While U.S. and UK courts would hear extensive testimony from expert witnesses in such cases, and German courts appoint their own experts in cases of far lesser significance (such as construction law disputes over only a few thousand euros), neither the Mannheim court nor the one in Munich appointed an economic expert to analyze whether the parties' positions were fair, reasonable, and non-discriminatory (FRAND). In all three SEP cases, the decisions were based on the judges' own determination that Nokia had discharged its FRAND licensing obligations and OPPO was an unwilling licensee.

I'm now going to report and comment on the situation in multiple parts:

1. Market shares: OPPO 10%, OnePlus 2-3%, and (soon to follow?) Vivo 8%

2. Hard evidence of OPPO and OnePlus having left the German market

3. Other patent assertions against OPPO in Germany

4. Why OPPO's calculus may simply make economic sense

5. Implications for Apple, Samsung, and Xiaomi

6. Comparison to previous market impact of other patent enforcement (particularly--but not only--in Germany) and Apple's about-face in the UK

7. Tactical implications for Nokia-OPPO licensing negotiations

8. German patent injunction reform: collective failure by Apple, Google, Nvidia, Deutsche Telekom, SAP, automotive industry

Market shares: OPPO 10%, OnePlus 2-3%, and (soon to follow?) Vivo 8%

According to Canalys, OPPO's worldwide market share was 10% in the first quarter of 2022--slightly down from 11% year-on-year. And there's another 8% for Vivo, which is not an OPPO affiliate, but like OPPO belongs to BBK Electronics Corporation of Guangzhou, China, and is also being sued by Nokia in Germany. Vivo hasn't exited the German market (here's a German Vivo product page) as there is no injunction in place yet, but given that OPPO has made the determination that it was prudent to leave the German market and to reject Nokia's royalty demands, it seems likely that--faced with the enforcement of an injunction--Vivo, too, would independently reach that conclusion when running the numbers.

So, in the short term we're talking about the exit of smartphone brands accounting for more than 10% of the market (OPPO + OnePlus), and in the mid term we may be talking about more than 10% (OPPO + OnePlus + Vivo). Vivo has much less of a market presence in Germany than OPPO.

When phones accounting for 10% or more of unit sales in a large market--and an even higher percentage of the low- and mid-range segments--become unavailable, it cannot be denied that there is an impact on consumer choice and possibly even a very significant output restriction in these times of chipset shortages. That, of course, does not mean to blame patent holders or the patent system. I'm talking about the practical consequences of this. This is plainly massive.

Hard evidence of OPPO and OnePlus having left the German market

I had mentioned in several previous posts the possibility of OPPO determining that it was too costly to stay in the German market, and then I ran a Twitter search to see whether someone else had also reported on yesterday's Nokia v. OPPO injunctions #3 and #4. I found this tweet by OPPOblog's Dominik Lux and another one that pointed me to this Go2Android.de article. Yesterday, Caschys Blog also reported on this development.

I've also verified the situation myself. OPPO's German website contains the following note (click on the image to enlarge):

That note translates as follows:

"Currently, no product information is available on our website.

"Q: Can I continue to use OPPO products without limitation, receive support, and receive future updates?

"A: Yes, you continue to be able to use your OPPO products without limitation, receive support, and of course you will receive all future updates."

The removal of product information is key because German patent injunctions typically enjoin a defendant not only from making and selling the products that have been held to infringe, but also from advertising them.

As for the availability of future over-the-air (OTA) software updates, Nokia can't do anything about that unless and until it enforces a patent on a technique that is essential to Android. Cellular standards are implemented at the hardware level, not in Android itself. The WiFi non-SEP over which Nokia won its first German injunction against OPPO can be worked around, but even that one may be implemented at the chipset level.

The German OnePlus store delivers the following when one clicks on the "Phone" category (click on the image to enlarge or read the text below the image):

"Uh-oh! Nothing is found.

"Try searching with different filters."

Some OnePlus accessories are still available. They are not among the accused products (for now).

German injunctions are binding only on the defendants, not on third parties. Therefore, resellers still have OPPO and OnePlus products in stock--though it's unclear for how much longer that will be the case. The largest one of those resellers is Deutsche Telekom (T-Mobile), which carries five OPPO and six OnePlus products as you can see in the following screenshot (click on the image to enlarge):

In the part on tactical implications for the Nokia-OPPO licensing negotiations I'll discuss what the parties' options with a view to OPPO's resellers are.

Other patent assertions against OPPO in Germany

While Nokia is the only patent holder with a German injunction in force against OPPO and OnePlus at this stage, there are other patent cases pending against OPPO and OnePlus in German courts:

• In December, U.S.-based patent licensing firm InterDigital announced patent infringement complaints in Germany, the UK, and India.

• Another patent licensing firm from the U.S., VoiceAge EVS, is also suing OPPO in Germany. Just this week, OPPO achieved the (appealable) invalidation of one VoiceAge patent shortly after another Chinese smartphone maker--Xiaomi--had settled shortly before a pair of Munich injunctions would potentially have come down.

• There may be even more than meets the eye, as German lawsuits are not publicly listed. One has to contact the press offices of the courts in order to find out, and I haven't recently inquired about cases that other parties than Nokia, InterDigital, and VoiceAge EVS have filed against OPPO.

• Furthermore, it is impossible to find out from the outside what other patent holders may have threatened OPPO with patent assertions in Germany that could happen--or could have happened--in the near term.

Why OPPO's calculus may simply make economic sense

The totality of the injunctions that have come down, as well as other pending and threatened cases, faces OPPO with the choice of

• taking global portfolio licenses on the patent holders' offered terms, thereby reducing margins and/or (as a result of price increases) the company's competitiveness in the rest of the world, or

• forgoing potential profits in Germany, possibly even in the long run, in favor of maintaining the company's margins and competitiveness in the markets where it generates the bulk of its sales.

It's what chess players call a gambit. Economically, it's an "op cost" (opportunity cost) analysis of two alternative scenarios.

According to the BITKOM industry association (of which Nokia is a member, too), the annual sales volume of smartphones in Germany is approximately 20 million devices with an average price of approximately 550 euros (US$560). The median would be more interesting to know, as Apple with its sky-high prices is not representative of the rest of the market. It is a safe assumption that OPPO's average price--even with OnePlus included--is significantly lower. That would mean a quantity of roughly 2 million units, at an average price of maybe 400 euros (US$407). If we assume a margin of maybe 10%, that would mean annual profits of approximately 80 million (euros or U.S. dollars).

On Thursday, InterDigital discussed OPPO's global sales volume in a conference call with investors, and an estimate of 200 million units was mentioned (I knew that the number was well over 100 million units per year). That means OPPO generates maybe about 1% of its global sales in the German market.

If we now compare those 80 million euros/dollars in annual profits from Germany to the impact of paying elevated patent royalties on the other 200 million units, the simplest way to look at it is that even if OPPO expected to save only about 40 cents in patent royalties on a per-unit basis, it would make sense to just leave--and even in the long run, stay out of--the German market. The difference between Nokia's and OPPO's positions may be a lot greater than that--and then there are various other patent holders, including the ones already suing OPPO in Germany. In the total of all the patent holders seeking leverage in Germany now or later, the per-unit cost increase could amount to several euros/dollars.

If OPPO assumed that it can get a substantially better deal in a matter of weeks or months, then it would pay off big-time to forgo some German sales, especially during the slow summer season.

OPPO may never really lose 100% of its German sales. Resellers and even consumers may buy products in other European countries, such as Austria or Poland.

Obviously, the question is then whether Nokia will get leverage over OPPO--or OPPO over Nokia, as it's a two-way dispute--in other jurisdictions, as cases are pending in many countries. I'll talk more about the tactical options both parties have from here on out further below.

Implications for Apple, Samsung, and Xiaomi

For Apple and Samsung, and probably even for Xiaomi, the calculus would be rather different if faced with a similar situation.

Apple--which has yet to renew its Ericsson, Nokia, and InterDigital license agreements, two of which have expired and the last one of which is about to expire--has far higher profit margins than OPPO, and doesn't target similarly price-sensitive customer groups as OPPO does especially (but not only) in Asia.

For instance, Apple generates only 0.2% of its worldwide sales in Colombia, but the cost of not being able to sell its 5G iPhones and iPads there is already substantial compared to the license fees Ericsson is seeking. Exiting the German market wouldn't be an option for Apple.

Samsung (which also has to renew the core part of its Nokia license rather soon) and Xiaomi are somewhere between Apple and OPPO in terms of per-unit prices, profitability, and market shares in affluent vs. developing countries.

Comparison to previous market impact of other patent enforcement (particularly--but not only--in Germany) and Apple's about-face in the UK

OPPO's withdrawal from the German market is of an unprecedented scope and scale. So far there had only been

• sales bans that temporarily affected limited parts of a given smartphone maker's line-up,

• temporary removals of features, and

• cases in which companies publicly or privately said they were contemplating exiting a market as an alternative to caving to a patent holder's demands, but in none of those cases did it actually happen when push came to shove.

The most recent case of a temporary exit from the German market concerning some--not all-- of a smartphone maker's products became known six months ago and involved HMD. That was due to the enforcement of patent injunctions by VoiceAge EVS.

The previous incident resulted from Qualcomm's enforcement of a patent injunction against Apple. That one, too, affected only some products: the iPhone 7 and 8, which were already the low-end iPhones at that time. While Apple was temporarily unable to sell them directly in its Apple Stores or online, those devices remained widely available through resellers. The problem was solved by Apple incorporating Qualcomm--not Intel--chips into the iPhone 7 and 8 for the German market. Had Apple and Qualcomm not worked it out, the appeals court would have lifted the injunction anyway: that's precisely what it did at a time when it no longer mattered.

In early 2012, Motorola (while in the process of being acquired by Google) was enforcing a Mannheim SEP injunction against Apple. As a result, Apple was unable to sell the iPhone 3G, the iPhone 3GS, and the iPhone 4 (but not the iPhone 4S), and all 3G/UMTS-capable iPads in Germany. But what was really going on was that Apple iteratively offered Motorola better terms until the appeals court--the Karlsruhe Higher Regional Court--deemed Apple's offer reasonable enough to stay the enforcement of the injunction.

What lasted more than a year was the impact of Motorola's push notification patent injunction. Apple had to disable that feature until the appeals court lifted it in 2013.

IPCom enforced a patent injunction against HTC in Germany before that, and a motion for contempt-of-court sanctions was brought, but there was no market impact.

Last year, Apple's outside counsel told a UK judge that her client might exit the British market if the court set too high a global royalty rate, but ultimately agreed to accept the UK court's determination, and the related trial took place a couple of months ago. (By the way, FOSS Patents was referenced on multiple occasions during that trial.)

Experienced licensing negotiators have witnessed countless situations in which companies said that if they were going to lose a case in a given jurisdiction, they'd rather leave that market than settle on a worldwide basis. Generally, no one ever took such statements too seriously. But with OPPO in Germany it appears that a point has been reached where a significant player has determined that pulling out is preferable over backing down.

Tactical implications for Nokia-OPPO licensing negotiations

Nokia and OPPO can hardly know what the other side's intentions are:

• Given that the current situation is unprecedented, Nokia may assume that OPPO is bluffing and not going to stay out of the German market for too long after the slow summer is over and OPPO's products that are currently in its resellers' warehouses have been sold.

  But if Nokia miscalculates in this regard, and OPPO actually does pay the price of staying out of the German market (also with a view to other pending patent cases), then the point will come at which Nokia is the more vulnerable side in Germany. OPPO's own enforcement of true 5G patents is likely to lead to injunctions against Nokia's mobile base stations.

• It would be reasonable for OPPO to assume that Nokia will want to turn the page on that dispute and focus on bigger fish to fry: Apple and Samsung--companies that, unlike OPPO, could not afford to pull out of Germany only to avoid taking a patent license on Nokia's preferred terms.

  But there's another side to this. Nokia knows that whatever deal it reaches with OPPO will be referenced in potential disputes with Apple and Samsung as a comparable license agreement. Nokia can argue that OPPO's average selling price is far lower than Apple's, and significantly lower than Samsung's. But the headline royalty rate is going to be part of the discussion.

  And this works both ways: OPPO won't be interested in weakning its position vis-à-vis other SEP holders (such as InterDigital).

With a view to Nokia's potential future disputes (Apple, Samsung etc.), there's also an upside and a downside from continued litigation with OPPO:

• With favorable decisions like yesterday, Nokia grows its selection of "surefire" patents it can assert against the likes of Apple and Samsung.

• But there could also be setbacks and losses. For instance, OPPO--maybe not least because the Nokia dispute forced it out of the German market for now--didn't take a license from VoiceAge EVS (unlike Xiaomi, which didn't take its chances), and defeated one VoiceAge patent in the Federal Patent Court (whose decision is now going to be appealed).

• Another risk factor for Nokia is that the appeals courts--with the Munich Higher Regional Court being a huge question mark since the new judge presiding over its patent-specialized division has virtually no track record in patent infringement jurisprudence--could overturn some of those first-round wins for technical reasons and/or disagree with the lower courts on FRAND-related questions.

What's unclear is how big a part of OPPO's problem some other German lawsuits (InterDigital, VoiceAge EVS, and any potentially unknown or yet-to-be-filed ones) are. The aggregate of the bid-ask differences between OPPO and those other patent holders could be comparable to, or greater than, the one in the Nokia case. In that case, settling with Nokia would at best solve half the problem fro OPPO. However, against InterDigital and VoiceAge EVS, OPPO can't countersue as those companies aren't selling products in Germany: their revenue model is patent licensing.

Then there are all those other jurisdictions in which Nokia and OPPO are currently embroiled in litigation. Simultaneously with the German cases, Nokia brought complaints in London, Paris, and Barcelona. OPPO sought a declaratory judgment in the Netherlands, where Nokia responded with non-compulsory counterclaims. In China, OPPO is seeking a FRAND determination, and Nokia brought infringement claims. Nokia is suing in India and Indonesia. In the latter jurisdiction, OPPO has so far defended itself, though Nokia could refile. Nokia also sued in Russia, but withdrew there over the Ukrainian situation--but then brought cases in Sweden and Finland.

Nokia may be able to obtain injunctions in some other jurisdictions, but it remains to be seen what the courts in those countries will say about Nokia's and OPPO's FRAND compliance. Divergent decisions are possible.

There are also tactical decisions to be made by Nokia in Germany. It's possible that resellers like Deutsche Telekom and MediaMarkt will just buy OPPO products in other countries within the EU's single market, such as Austria or Poland. Nokia wouldn't want to sue the carriers as they are its network infrastructure customers. What Nokia could consider is a petition for border seizures by customs authorities (here's a German-language article (PDF) by the Bardehle Pagenberg firm on that topic).

We may not see an immediate settlement during the summer, but the closer we get to the Christmas Selling Season, the more likely it is that a deal will happen. Otherwise, OPPO would have nothing left to lose in Germany, but could at some point enforce injunctions against Nokia in Germany.

Should there be no settlement in the near term, we'd likely also see the parties file cases with the Unified Patent Court (UPC) in order to obtain EU-wide injunctions.

German patent injunction reform: collective failure by Apple, Google, Nvidia, Deutsche Telekom, SAP, automotive industry

It's been almost exactly a year since a German patent "reform" bill entered into force. While OPPO wasn't visible in the lobbying efforts related to that piece of legislation, companies like Apple, Google, Nvidia, Deutsche Telekom, SAP, and the German automotive industry had completely false hopes that a modified injunction statute (§ 139 of the German Patent Act) would lead to a departure from Germany's near-automatic injunction regime.

I've commented on that monumental lobbying failure on various occasions, such as earlier this year when two Dusseldorf judges made it clear that patent holders would continue to obtain injunctions in virtually every case where they prevail on the technical merits. More recently, there have been court rulings--also from Dusseldorf--that clarified that the situation was still the same as before. German judges have pointed out in their decisions as well as in public speeches that the language that got inserted into § 139 last year merely codifies the prior case law, under which a plaintiff either has to make stupid mistakes or seek a sales ban on, say, the printing of bank notes or a COVID vaccine in order to be denied an injunction. It's not even clear whether a proportionality defense could succeed in a single case in which a defendant wouldn't be entitled to a compulsory license anyway.

A few months ago, even ip2innovate, a lobbying front for the likes of Google, Nvidia, Daimler, and SAP--conceded in light of an injunction against car maker Ford that the legislative amendment hasn't really lived up to those companies' expectations. Well, I already predicted it in early 2000 right here on this blog. They just wouldn't believe me then. They now know that I was right with my predictions, and they were strategically on the wrong track.

OPPO's exit from the German market illustrates it again. Being exposed to German patent litigation is a vulnerability that some may prefer to avoid regardless of the opportunity costs from not serving such a large and otherwise lucrative market.

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